EU Approves FedEx Acquisition of TNT Express -- 2nd Update
January 08 2016 - 12:04PM
Dow Jones News
By Tom Fairless and Laura Stevens
BRUSSELS--European Union regulators have unconditionally
approved FedEx Corp.'s acquisition of Dutch parcel company TNT
Express NV, ending a six-month antitrust investigation that had
been one of the biggest hurdles for the nearly $5 billion deal.
The merger, announced in April, would allow FedEx to acquire an
extensive ground network in Europe, making it a bigger player in
the burgeoning e-commerce market.
The approval had been expected since FedEx said in October that
European regulators wouldn't challenge the transaction. That was
seen as an unexpectedly easy pass from Europe's antitrust police,
who had blocked a similar deal between rival United Parcel Services
Inc. and TNT in 2013.
It is good news for FedEx, which suffered a black eye over the
holidays, as it admitted that last-minute online orders and severe
weather resulted in some packages arriving late.
FedEx is still awaiting approvals from several countries, most
notably China and Brazil, while U.S. regulators approved the deal
last year.
China recently has emerged as something of a wild card for
deal-makers world-wide, as the country's newly-established
antitrust authority considers issues beyond traditional competition
law, including whether deals may harm Chinese national economic
development, experts say. It also has a smaller staff than many of
its peers.
As a result, China has held up for months some recent global
mergers after they were approved by U.S. and EU antitrust
authorities, including Microsoft's Corp.'s EUR5.4 billion ($5.85
billion) acquisition of Nokia Corp.'s handset business.
Analysts largely expect FedEx to receive clearance from the
remaining countries, and FedEx said it is confident it will close
the deal in the first half of the year.
On an analyst call last month, FedEx Chief Executive Fred Smith
said TNT would be a welcome addition to the company's portfolio
amid a global economic slowdown. "Despite contraction of U.S.
exports due to the high U.S. dollar and low world [economic] and
trade growth, the overall market for international door-to-door
express continues to increase, also driven by e-commerce," he
added.
Up until now, FedEx has largely focused on international
delivery services in Europe, with limited shipping options between
countries. Combining the two networks will make it the third
largest player in Europe's international express-delivery market,
behind Deutsche Post AG's DHL and UPS. It will allow the company to
become a player in ground delivery to better compete with the
others for a bigger share of e-commerce shipments.
The European Commission opened a full investigation into the
deal in July, warning that the merged company might face
insufficient competition on certain parcel delivery routes, which
could lead to higher prices for businesses and consumers.
But on Friday, the regulator said it had concluded the delivery
companies weren't particularly close competitors in Europe and that
the merged entity would "continue to face sufficient competition
from its rivals."
"We are extremely pleased to receive the European Commission's
unconditional approval," said David Binks, FedEx's regional
president for Europe. Mr. Binks said the deal would "provide
significant value to the employees, customers and shareholders of
both companies."
EU antitrust chief Margrethe Vestager said her agency had
"thoroughly assessed the markets affected" by the deal due to the
importance of affordable package delivery for many businesses and
consumers, particularly in the burgeoning e-commerce market. "The
conclusion is that European consumers will not be adversely
affected by the transaction," Ms. Vestager said.
Executives at both companies had maintained the deal was
substantially different from Atlanta-based UPS's attempt because
FedEx's operations in Europe are much smaller than UPS's were.
UPS had revised its EUR5.2 billion ($5.63 billion) proposal,
then valued at nearly $7 billion, three times and made plans to
create a pan-European competitor in the overnight-parcel-delivery
market, but it still failed to satisfy the EU's concerns.
Write to Tom Fairless at tom.fairless@wsj.com and Laura Stevens
at laura.stevens@wsj.com
(END) Dow Jones Newswires
January 08, 2016 11:49 ET (16:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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